PETALING JAYA: Tan Chong Motor Holdings Bhd (TCMH) posted its first quarterly loss in 17 years during the three months to March 2016 (Q1’16), as intense competition and the weak ringgit hit its bottom line.
In a filing with Bursa Malaysia, the automotive assembling and distribution company said the challenging business environment during the quarter had resulted in the company slipping into a net loss of RM37.21mil, compared with a net profit of RM26.35mil in the corresponding quarter last year.
“The challenging business environment, marked by intense competition coupled with significant currency headwinds faced by the ringgit, has impacted the bottom line,” TCMH said.
During the quarter in review, the group saw its revenue fall 6.6% to RM1.47bil from RM1.57bil previously. Its loss per share stood at 5.70 sen in Q1’16 compared with an earnings per share of 4.04 sen in Q1’15. TCMH’s shares closed unchanged at RM2.20.
The group said the remaining three quarters of the current financial year would likely be tough due to the volatility in the domestic and global economic situation.
“We believe the domestic automotive sector will remain challenging, as consumer confidence remains weak,” TCMH said, adding that it would remain disciplined and focused on key priorities to weather the challenges.
“Our aim is to be cash-generative and deliver profitable growth through the economic cycle,” it explained.
Among the initiatives TCMH had implemented were raising the selling prices of certain Nissan models by around 2.7% to 6.7% from April 1, 2016 to mitigate the impact of the weak ringgit, focusing on sales and marketing activities together with value offerings to enhance sales and boost competitiveness in the domestic market, and strengthening its footprint in Vietnam and other Indo-China countries by expanding its sales network and filling plant capacity with new models.
In Q1’16, TCMH said its automotive division saw a 6.6% year-on-year (y-o-y) decline in revenue to RM1.45bil and a 81.6% y-o-y fall in earnings before interest, tax, depreciation and amortisation (Ebitda) to RM13.5mil.
“The lower revenue was due to the overall slower consumer demand, and consequently the lower Ebitda as a result of higher completely-knocked-down kit cost, arising from the unfavourable foreign exchange rate compared to the previous year,” it pointed out.
Meanwhile, TCMH’s financial services division saw a 3.8% decline in revenue to RM13.8mil on a lower volume of motor insurance policies, while Ebitda fell 54.9% y-o-y to RM3.2mil due to a one-off impairment loss provided for hire purchase receivables of RM3.4mil during the quarter in review.
The group said its other operations, comprising investments and property, also posted a lower revenue and earnings, with income falling to RM2.7mil compared with RM4.3mil previously, while losses stood at RM3mil, compared with an Ebitda of RM5.6mil.
“The loss suffered was due to the unrealised forex loss, arising from financing overseas entities denominated in foreign currencies,” TCMH said.
